DIpil Das
FROM THE DESK OF DEBORAH WEINSWIG
Sustainability: What European Retailers Are Doing Environmental sustainability is a topic that we continue to watch closely and report on frequently. Our European analysts have seen sustainability positioned front and center in a slew of recent updates from major European retailers. We cover recent updates on innovation in the space from four major European retail names. Tesco: Green Bonds This week, Ken Murphy, CEO of UK grocery giant Tesco, told analysts:Our sustainability and our ESG agenda is no longer an aside…It has been truly integrated into everything we do as a business. And it will show up in everything from our product innovation through to how we think about our operating model.
In October 2020, Tesco became the first UK retailer to issue a bond with science-based targets: The rate of interest payable is linked to its delivery of ESG targets on emissions, food waste and renewable energy. Moreover, in January 2021, Tesco became the first retailer to issue a sustainability-linked bond; which is aligned to an agreed target of reducing greenhouse gas emissions (Scope 1 and 2) by 60% by 2025 against a 2015 baseline. Tesco is committed to achieving net-zero carbon emissions by 2035 (from an original target date of 2050) and Murphy this week reiterated the company’s commitment to the “four Rs” in packaging—removing unnecessary packaging, reducing the volume, recycling what is used and reusing where possible. In February, grocery rival Sainsbury’s announced that it was the Principal Supermarket Partner for the United Nation’s upcoming international climate change conference, COP26, which is taking place in Glasgow in November. Sainsbury’s pledges to reach net zero in 2040 and is set to discuss how ESG is embedded in its business in an event in June 2021. Sustainable Supply Chains at ASOS ASOS introduced a Circular Design Collection, intended to reduce waste and promote reuse and recycling, in September 2020. Last week, management noted that it had been a “great success,” with 8,000 units sold to date. In its latest half-year results, reported last week, ASOS stated that it worked with UK brands to sign them up to its transparency pledge, introduced in August 2020, which requires businesses to regularly publish details on their manufacturing supply chains. ASOS also noted in its interim results that around 75% of all its operations are now powered by renewable electricity, and that it has launched electric vehicle next-day delivery services in Berlin. We expect to hear more on the topic of sustainability at ASOS’s Capital Markets Event in the coming week. Zalando: Measurable Goals At Zalando’s recent Capital Markets Day, management outlined that the company aims to reduce the carbon emissions from its business by 80% by 2025, as benchmarked to 2017. To commit to this goal, Co-CEO Rubin Ritter stated that 90% of the suppliers Zalando works with will have emissions-based targets by 2025. Moreover, Zalando is looking to expand its sustainable product assortments from 16% of its GMV in 2020 to 25% by 2023. Last year, the company announced that, by 2023, all brands on its platform will have to provide assessments against the Higg Brand and Retail Module, which measures sustainability. In addition, the company has raised the content requirement standard of its products that are branded recycled from 20% to 30%. The company discussed its aspiration to contribute to moving away from a linear fashion industry toward a circular pattern of consumption, through recycling and reuse. Zalando aims to extend the lifespan of over 50 million of its products by 2023, as reflected in the launch of its Zircle resale business in September 2020. In the coming week, Zalando is set to host a webinar on how to enable the fashion industry and consumers to make more sustainable choices. Boohoo Group Signs Up Boohoo Group has scaled by selling ultracheap, semi-disposable clothing. However, in March, the company announced the launch of its new sustainability strategy, called UP.FRONT Fashion Ready for the Future. The company stated that the strategy sets “bold targets” in three areas: smarter manufacturing, better terms for suppliers and reducing its carbon footprint. The company will provide an update on this strategy in May. Deeper Changes Needed? The adoption of sustainability programs across industries and tiers reflects how these are now essential components of corporate strategies. Investors and customers are paying ever-closer attention to sustainability. Circular models such as rental and resale are ways to address this, although we expect demand for these will remain niche in the medium term and have limited applicability. With purchasing of moderately priced goods likely to account for the lion’s share of purchase volumes, mass-market brands and retailers must continue to pursue incremental improvements in their environmental credentials.US RETAIL AND TECH HEADLINES
Amazon Expands Private-Label Assortment with Aplenty (April 12) RetailDive.com- Amazon has launched a new private-label food brand, Aplenty, which is available from its website and Amazon Fresh grocery stores. The e-commerce giant plans to roll out hundreds of Aplenty-branded products over the next year.
- Aplenty products are free from artificial flavors, synthetic colors and high-fructose corn syrup. Its product range currently includes pita chips, slow-baked cornbread crackers and salted caramel chip mini cookies—baking mixes, cookies, frozen foods and pantry staples will be introduced over the coming year.
- Private equity firm Carlyle Group has acquired a majority stake in direct-to-consumer clean-beauty brand Beautycounter at a $1 billion valuation. The funding amount was not disclosed.
- Beautycounter plans to use the funds to strengthen digital innovation and to expand, according to founder and CEO Gregg Renfrew. She commented, “We are going to enhance our digital capabilities to broaden our reach. We know that we can reach many more people both within North America and beyond its borders.”
- CVS Pharmacy has expanded its frozen food assortment in selected stores, offering brands including Amy’s Kitchen and Beyond Meat. In addition, selected stores will also carry freshly prepared foods aimed at shoppers seeking grab-and-go meals.
- The drug retailer’s new food choices meet various dietary preferences—certified organic, gluten-free, plant-based and vegan—amid the company’s recent expansion of consumables, focusing on healthier products.
- Sportswear brand NIKE has launched Nike Refurbished, as part of its effort to appeal to environmentally conscious consumers. The program will extend the life of returned NIKE shoes by refurbishing and reselling them. It is currently available in 15 US stores.
- The pricing of refurbished shoes will depend on their condition and will be divided into three categories: “Like New”—perfect or near-perfect condition; “Gently Worn”—visible light or cosmetic flaws; and “Cosmetically Flawed”—no signs of wear but slightly imperfect. Shoes that are too worn to be resold will be moved to its Nike Grind program, which recycles products to make items including other shoes, outdoor courts and rubber flooring.
- Online personal styling service Stitch Fix has announced that Founder and CEO Katrina Lake will step down as CEO and transition to the role of Executive Chairperson of the Board, effective August 1, 2021. Lake will remain an employee of the company and will focus on Stitch Fix’s social impact efforts—in particular, the intersection between sustainability and technology in apparel retail.
- Lake will be succeeded by the company’s current president, Elizabeth Spaulding, who will be elected to the Board of Directors.
EUROPE RETAIL AND TECH HEADLINES
JD Sports Announces Sales of £6.2 billion in 2020 (April 13) Company press release- JD Sports reported a 1% rise in sales, to £6.2 billion ($8.6 billion), in its fiscal year ended January 30, 2021. Although stores in many markets were forced to close temporarily due to lockdown restrictions, the company was able to grow its sales due to consumers’ shift to online channels.
- Operating profit declined by 9.8%, driven by a 5.9% increase in selling, general, and administrative expenses. Management pointed to the higher marketing and fulfillment costs associated with selling online, as well as costs related to Covid-19 health and safety measures.
- John Lewis Partnership has appointed Amir Goshtai as its new Financial Services Director, starting from June 2021. Currently working at business services company Experian, Goshtai will bring over 20 years of experience in retail financial services.
- Goshtai will be responsible for delivering growth of the firm’s financial services products, which the company is committing £100 million ($138 million) to over the next five years.
- During its first quarter of 2021, LVMH generated revenue of €14.0 billion ($16.8 billion)—representing total growth of 32% compared to the year-ago period.
- While nearly all business segments reported double-digit growth, the Selective Retailing segment reported a 5% decline in total organic sales due to international travel restrictions related to the pandemic. The Fashion and Leather Goods business reported total organic revenue growth of 52% during the company’s first quarter of 2021 and the Wines and Spirits business reported total organic growth of 36%.
- New Look has appointed Ed Alford as its new Chief Technology Officer (CTO), effective April 12, 2020. In this newly curated role, Alford will be responsible for driving New Look’s omnichannel sales strategy, as well as for its technology investment, engineering and IT functions.
- Alford has more than 20 years of experience in technology and, in his previous role as VP and CIO Digital Transformation at BP, he was instrumental in executing the strategic transformation of the company’s IT functions.
- Tesco reported a 7.7% rise in UK comparable sales and a 6.3% increase in group comparable sales for the fiscal year ended February 27, 2021. UK online sales climbed 77% in the year.
- Group operating profit before exceptional items declined by 28.3% (at constant currency and excluding a 53rd week) and statutory pretax profit fell by 19.7%. Profits were hit by £892 million ($1.2 billion) in Covid-19 costs in the UK and the voluntary repayment of £535 million ($738 million) of business rates relief in the UK.
ASIA RETAIL AND TECH HEADLINES
ADLV to Enter Australian Market with Launch of Brick-and-Mortar Outlet (April 14) InsideRetail.asia- Korean apparel brand Acmé de la Vie (ADLV) has announced plans to launch its first brick-and-mortar location in Australia in May 2021 at QV Melbourne shopping center. The company is set to launch a local e-commerce platform shortly afterward. The store will focus on high-end streetwear fashion, selling accessories, hoodies, outerwear, sweats and T-shirts.
- The ADLV brand, founded by Jinmo and Jaemo Goo, opened its first shop in the Gangnam district of Korea in late 2017. The company currently operates more than 50 stores in Asia and has collaborated with Disney, Kakaotalk, Pink Fong and The Simpsons.
- Wristwatch manufacturing company Timex India has announced a licensing deal with apparel brand United Colors of Benetton for the design, manufacture and distribution of the brand’s watches exclusively for the Indian market. The partnership will launch the “Timewear” collection in the second quarter of the current fiscal year.
- Catering to kids, men and women, the product portfolio will span four categories: Iconic, Signature, Social and Sport. The partnership marks United Colors of Benetton India’s first foray into the watch business.
- Flipkart is reportedly close to finalizing its acquisition of Indian travel and booking platform Cleartrip for $40 million, as the Indian hospitality industry continues to reel from the impacts of the pandemic. Cleartrip, which earns more than 80% of its revenues from airline bookings, reported a 2.5% drop in fiscal 2020 and laid off 400–500 employees last year.
- The deal will strengthen Flipkart’s operations in hospitality and pit the e-commerce giant directly against market leaders, including Booking.com, MakeMyTrip and Yatra.
- Li & Fung has launched a new company, LFX, to capitalize on emerging digital opportunities in the retail industry and accelerate supply chain sustainability. Li & Fung’s CFO, Ed Lam, has been named CEO of the new business and has stated that it will focus on reducing environmental impacts and promoting sustainable consumption.
- LFX will serve as an incubation, investment and operating platform providing digital solutions and services across the consumer goods supply chain. It will launch and operate digital ventures, delivering solutions directly to brands, e-tailers, retailers and manufacturers.
- Singapore-based unstaffed convenience store chain Pick & Go has launched its third outlet inside the premises of the National University of Singapore. Pick & Go was founded in 2019 and is the first artificial intelligence (AI)-driven unstaffed convenience store chain in the country. Its flagship store is based at the Singapore University of Technology and Design and its second store at Lakepoint Condo.
- The store, called My Village, spans more than 3,000 square feet and offers a cashier-less, checkout-free experience round the clock. The store is set to house around 50 local brands by the end of 2021.